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Chapter 23: Q 5. (page 617)

If the labor force becomes more productive over time, how would the long-run aggregate supply curve be affected?

Short Answer

Expert verified

Long-run aggregate supply curve shifts to the right.

Step by step solution

01

Step 1. Define aggregate demand and aggregate supply.

Aggregate demand is defined as the total amount of demand produced in the economy for all finished goods and services.

Aggregate supply, often known as total production, is the total amount of products and services in a given economy over a certain time period at a given overall price.

02

Step 2. How would the long-run aggregate supply curve be affected?

As the labor force becomes more productive over time, the overall amount of labor supplied in the economy rises. This improves the long-run aggregate supply curve by shifting it to the right and raising potential output.

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Most popular questions from this chapter

Suppose the inflation rate remains relatively constant while output decreases and the unemployment rate increases. Using an aggregate demand and supply graph, show how this scenario is possible.

Why did China fare much better than the United States and the United Kingdom during the 2007-2009 financial crisis?

The financial crisis of 2007-2009 sent the United States into its worst recession since the end of World War II, with the unemployment rate rising to above 10%. Go to Federal Reserve Economic Data | FRED | St. Louis Fed (stlouisfed.org) and click on the Series ID link "UNRATE" (Civilian Unemployment Rate). What has happened to the unemployment rate since the time of the last reported value in Figure 16?

Explain why the aggregate demand curve slopes downward and the short-run aggregate supply curve slopes upward.

Why did the Federal Reserve pursue inherently recessionary policies in the early 1980 s?
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